Trinidad and Tobago Budget 2025–2026 Introduces Asset-Based Levy, NIS Contribution Hike, VAT-to-Sales Tax Transition
In presenting the 2025–2026 National Budget to Parliament on 13 October 2025 (seeFinance Minister to Present 2025-2026 National Budget (13 October 2025)), Minister of Finance Davendranath Tancoo announced a suite of fiscal and structural reforms designed to stabilize public finances, enhance the efficiency of tax administration, and secure long-term social protection. Key measures include the introduction of a new asset-based levy, reforms to the National Insurance System (NIS), modernization of the Inland Revenue and Customs Divisions, and significant steps toward comprehensive tax policy reform.
Asset Levy on Financial Institutions
Effective 1 January 2026, a new asset levy will be imposed at a rate of 0.25% on assets held by commercial banks and insurance companies operating in Trinidad and Tobago. Institutions licensed under the Special Economic Zones Act 2022 are expressly exempt. The levy is projected to raise TTD 575 million annually and reflects the government's broader policy objective of diversifying revenue sources away from traditional consumption and commodity-based taxes.
NIS Reform
To safeguard the solvency of the National Insurance Fund, the Minister announced a phased increase in contribution rates:
- 5 January 2026: 16.2% (up from 13.2%); and
- 4 January 2027: 19.2%.
Beginning 1 January 2028, the retirement age for a full NIS pension will rise by 1 year every 2 years until reaching 65 years in 2036. Individuals retiring before 2028 and existing pensioners will not be affected.
Removal of Income Tax on Private Pensions
With effect from 1 January 2026, income tax will be removed from private pensions to encourage voluntary retirement savings and strengthen household financial resilience.
Launch of National Investment Fund II Bond
The National Investment Fund Holding Company Limited (NIF) will issue a TTD 1 billion "NIF II Bond" in Q2 Fiscal 2026. The tax-free bond to investors will be secured by 21% of the government's shareholding in First Citizens Group Financial Holdings Limited (FCGFH), valued at approximately TTD 2 billion. The state will retain indirect ownership of 60.11% of FCGFH.
Reform of VAT System and Transition to Sales Tax
The government has signalled its intention to review the existing value added tax (VAT) regime with a view to transitioning to a simplified sales tax levied at the final retail point. This will address inefficiencies such as refund delays, compliance burdens, and evasion while ensuring revenue neutrality and social equity.
Transfer Pricing Legislation
Following an Economic Commission for Latin America and the Caribbean study estimating TTD 17.5 billion in lost revenue due to profit shifting, transfer pricing legislation will soon be introduced. It will enshrine the arm's length principle, provide detailed regulations, and include Inland Revenue Division (IRD) training, with implementation targeted within 2 years.
Modernisation of Tax Administration
Reforms to the IRD include recruitment of auditors, tax officers, and ICT staff, along with an upgrade of the GenTax system. The Customs and Excise Division (CED) will also undergo an 18-month ASYCUDA upgrade with the United Nations Trade and Development (UNCTAD) to streamline clearance, enhance compliance, and strengthen border control.